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Full text of "ANNUAL REPORT - ONTARIO ENERGY BOARD (fiscal year ended March 31, 1986)"

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ANNUAL REPORT 

Fiscal Year Ended - March 31, 1986 






Ministry 

of 

Energy 



Energy 
Ontario 

56WellesleySt.West 
1 2th Floor 
Toronto, Ontario 
M7A 2B7 
416/965-4286 
Telex 06217880 



TO: 

The Honourable Lincoln M. Alexander, 
P.C., Q.C., C.StJ., B.A. 

Lieutenant Governor of the 
Province of Ontario 



MAY IT PLEASE YOUR HONOUR: 



I take pleasure in submitting the Annual Report of the Ontario Energy 
Board for the fiscal year ended March 31, 1986. 

Respectfully submitted, 




Vincent G. Kerrio 
Minister of Energy 



TABLE OF CONTENTS 



Letter from the Minister of Energy 
T.he Honourable Vincent G. Kerrio Inside front cover 

Highlights of Three Major Gas Utilities 1 

Message from the Chairman 
Robert W. Macaulay 2 

Board Members Fiscal 1985/86 3 

Role and Jurisdiction 4 

The Public Hearing Process 6 

Organization 9 

Overview 10 

The Year in Review 

Pipeline Construction and Expropriations 13 

Franchise Approvals 14 

Pipeline Exemptions 14 

Certificates of Public Convenience or Necessity 15 

Uniform Accounting Orders 15 

Reference Regarding Ontario Hydro 16 

Other Energy Board Orders 17 

Reports to the Minister 18 

References from the Lieutenant Governor 19 

Natural Gas Rate Reviews 21 

Mini-Glossary 28 



HIGHLIGHTS OF THREE MAJOR GAS UTILITIES 
UNDER BOARD JURISDICTION 

Average Average 

Year Rate Gas Sales Residential Number of 

Firm Ending Assets Base Revenues Bill Customers 

Union (Mar. 31/86) $1,338,695,000 $ 880,392,000 $1,392,594,000* $752.57 518,244 

Consumers' Gas (Sept. 30/85 $1,608,207,000 $1,281,500,000 $1,657,213,000 $901.56 842,271 

Northern & Central (Dec. 31/85) $ 448,021,100 $ 308,137,000 $ 532,030,000 Western - $877.39 151,578 

Northern - $887.06 
Eastern - $776.68 

TOTAL $3,394,923,100 $2,470,029,000 $3,581,837,000 1,512,093 

* Includes revenue from storage and transportation of gas for others. 



MESSAGE FROM THE CHAIRMAN 



As the Ontario Energy Board enters its second 
quarter century, we have learned that the need for 
adaptability and responsiveness is the only 
constant that a regulatory agency can expect. In 
its twenty-six years of operation, the Board has 
labored to keep the regulatory environment in 
step with the times as the energy sector has gone 
from shortages to gluts, from prices that spiralled 
upward to those that spiralled down. The only 
matter that has not changed is the recognition by 
the Board that it must exercise its public 
responsibilities with sensitivity and care, having 
regard for such concerns as equity, fairness, 
consistency and the public interest. 

In 1960, as Minister of Energy in Ontario, I 
assisted in the creation of this Board. I felt 
privileged at that time to have a direct hand in 
developing an innovative and, we hoped, 
effective response to the need to manage energy 
resources in the Province. I believe that the Board, 
as established, has proved its effectiveness and 
worth over the years. And once again I feel 
privileged to have direct involvement with this 
Board at such an interesting period in the 
regulation of energy in Canada. 

The past year has brought major changes in the 
field of energy resource management. Many 
people refer to this movement as deregulation. I 
believe that this term is both overused and 
misleading. Certainly the Western Accord and the 
Agreement on Natural Gas Markets and Prices 
do, in some ways, introduce market forces into 
the production and sale of energy to a much 
greater extent than existed before. But rather than 
reducing the need for regulation, these 
federal-provincial agreements have created many 
new issues that require regulatory attention. The 
Board has begun to address these issues so that 
Ontario may realize benefits from the new 
operating environment. Many of the questions 
raised, however, will no doubt take some years to 
resolve as the industry and the regulators gain 
experience with the new systems. This Board is, 
in my opinion, equal to whatever challenges come 
its way in ensuring that the public interest is 
protected in these turbulent times. 

Looking after the public interest is an exacting 
task. In carrying out its work, the Board often 
must grapple with the question of its relationship 



to the Ontario government. Many people take the 
view that the Board is an independent body 
which is free to make its decisions without 
recognition of government statements or policy. 
This interpretation of the Board's role is, I think, 
overstated. I, for one, do not feel that the public 
interest can be effectively served if the Board and 
the Government are striving for inconsistent 
goals. That is not to say that the Board is a rubber 
stamp for government policy; but that it must be 
cognizant of such policy, recognizing and 
weighing it in its deliberations. The Government, 
after all, represents all residents in the province, 
both individual and corporate, including the 
utilities under this Board's jurisdiction. It is my 
view that we have a public duty to understand 
and respect Government's intention insofar as it 
is consistent with our mandate to ensure that the 
public interest is served. At the same time I feel 
that the work produced by the Board provides the 
policy makers with valuable findings and insights 
for use in their determination of policy direction. 

During fiscal 1985/1986 the Board continued the 
efforts begun the previous year to introduce 
greater computerization. New technology not 
only makes possible easier and faster execution of 
tasks previously undertaken manually, but also 
facilitates the implementation of more timely and 
sophisticated analysis and surveillance of the 
operations of the companies under the Board's 
jurisdiction. As well, modelling techniques allow 
greater precision in evaluating data for the 
prospective test year that is used as the basis for 
determining utility rates. Computerization also 
has prompted a review of information 
requirements for Board proceedings. The Board 
and the natural gas utilities are discussing 
possible modifications to these requirements as 
well as a policy on disclosure of information 
provided by the utilities for use in this 
information system. 

The major case summaries for fiscal 1985/1986 
given later in this Report illustrate that the issues 
confronting this Board are far from parochial. 
Developments in the Canadian and world 
economies, in the various industries that compete 
for a share of the Ontario energy market, in 
financial market conditions, in new technologies, 
in environmental concerns, and in the 
ever-evolving definition of the public interest all 



must be weighed by the Board in reaching its 
decisions. The various Board members bring an 
impressive array of experience and specialized 
knowledge to its deliberations. We are continually 
reviewing the mix of skills available in order to 
maintain balance and scope in the composition of 
the Board. 

Changes in membership of the Board during 
fiscal 1985/1986 include the departures of Mr. 
Harvey R. Chatterson and Dr. Bunli Yang. We 
thank these gentlemen for their contributions to 
the work of the Board during their terms of 
service. 

The increasingly complex workload could not 
have been handled without the talent, expertise 
and cooperation of our very dedicated staff. Over 



the past year, the strength of our staff resources 
has been enhanced through reorganization and 
skill diversification, resulting, I feel confident, in 
this Board's having a staff second to none. I know 
that the entire Board joins me in thanking these 
people for their conscientious and competent 
support. 

As we look to the future, I can say with 
confidence that this Board is ready and able to 
fulfil the duties entrusted to it. 




V 



Robert W Macaulay, Q.C. 
Chairman 




Ontario Energy Board 




Seated, left to right: John C. Butler, Robert W. Macaulay, Marie C. Rounding. Standing, left to right: John K. Shurie, Malcolm 
Jackson, Richard R. Perdue, Orville J. Cook, Denis A. Dean, Donald H. Thornton, Joseph A. Dekort, Patrice E. Boisseau. 

Board Members Fiscal 1985/1986 

Chairman: Robert W Macaulay, Q.C. 

Vice Chairman: John C. Butler 

Members (in order of appointment): 

Harvey R. Chatterson, Richard R. Perdue, Q.C, Donald H. Thornton, Q.C, 
Denis A. Dean, Marie C Rounding, Orville J. Cook, Patrice E. Boisseau, 
Bunli Yang, Joseph A. DeKort, John K. Shurie, Malcolm Jackson 



ROLE AND JURISDICTION 



For 26 years the Ontario Energy Board has played 
an important role in the management of vital 
energy resources in Ontario. The Ministry of 
Energy has an overall mandate to ensure a supply 
of energy that meets the needs of Ontario 
residents and industry at reasonable prices in a 
manner consistent with the protection of the 
environment. The Board contributes to the 
realization of this energy goal by exercising its 
regulatory mandate over the natural gas 
distributors and providing advisory services to 
the government on certain energy matters 
including reviewing changes in Ontario Hydro's 
bulk power rates. The major activities of the 
Board are highlighted in the following sections. 

Natural Gas Utility Regulation 

The regulation of gas utilities encompasses a wide 
variety of functions including approving franchise 
agreements; granting certificates of public 
convenience and necessity; approving rates and 
charges for the sale, distribution, transmission, 
and storage of gas; granting leave to construct 
pipelines or related facilities; granting authority to 
expropriate land for such pipelines or facilities; 
recommending to the Lieutenant Governor in 
Council designated gas storage areas; authorizing 
the use of such areas; and determining 
compensation payable to landowners of such 
designated areas. 

The rationale for such regulation is twofold. In 
order to avoid costly duplication of facilities used 
in providing customer service, Ontario, like most 
jurisdictions in North America, has established a 
system whereby a gas utility must acquire a 
franchise and a certificate of public convenience 
and necessity before it can provide service in a 
given locality. In exchange for this monopoly 
position, the gas utilities submit to regulatory 
control. In addition, regulation provides some 
control over the expansion of the transmission 
and distribution system in the province. 

In performing its regulatory functions, the Board 
must follow specific procedures and tests which 
are prescribed in legislation. For example in 
setting rates, the Board must evaluate a utility's 
submission using a "rate base rate of return" 
method. In this process the Board determines the 
rate base of the utility for a test year— the net 



amount which the utility will have invested in 
facilities, working capital and other items to 
provide service to customers; then it determines 
what constitutes a fair return on that investment 
to the company's shareholders recognizing that, 
to be viable, a utility must be able to attract capital 
at competitive and reasonable rates. Expenses 
incurred in providing service are calculated and 
the return and the expenses are added together to 
obtain the company's revenue requirement — the 
amount it must collect from gas sales in order to 
recover the total cost of providing service. This 
total revenue requirement must then be allocated 
among the company's various classes of 
customers — residential, commercial, and 
industrial. The cost of providing service to each 
class and sub-class is different, and the Board 
must decide how much of the total revenues 
should be derived from each. The object is to 
determine just and reasonable rates — for the 
utilities and for their customers. The process 
described briefly here is, in reality, quite complex 
and is governed by both law and established 
regulatory and accounting principles. 

The Board's Decision, usually issued with 
Reasons, results in a Board Order which is 
binding on the gas utility and also on other 
named parties such as a municipality or the 
utility's customers. 

Review of Ontario Hydro 
Rate Proposals 

When Ontario Hydro proposes changes to its 
bulk power rates, it must submit its rate proposal 
to the Minister of Energy. The Minister, in turn, 
refers the proposal to the Ontario Energy Board 
for review in a public hearing. The terms and 
scope of the Board's enquiry are set by the 
Minister in his reference to the Board, and 
normally do not provide for the same degree of 
examination as is undertaken for the gas utilities. 
The Board submits its report with recommendation 
to the Minister. Recommendations made by the 
Board are not binding on Ontario Hydro, and the 
final decision on rates rests with Hydro's Board of 
Directors. 



Special References 

From time to time the Board is called upon to hold 
public hearings and make reports on various 
energy-related issues referred to it by the 
Lieutenant Governor in Council, the Minister of 
Energy, or the Minister of Natural Resources. 
Such hearings provide an opportunity for 
individuals, public interest groups, and the 
industry to advance their views on important 
current energy issues. The ensuing report is 
advisory only, enabling the government to benefit 
from a thorough airing of each issue while 
maintaining its prerogative to set policy. 

The Board itself also may initiate hearings on 
matters under its jurisdiction. 

Administrative Matters 

In addition to the foregoing responsibilities, 
which arise mainly from the Ontario Energy 
Board Act, the Board administers certain 
energy-related provisions of the Municipal 
Franchises Act, the Petroleum Resources Act, the 
Public Utilities Act, the Assessment Act, and the 
Toronto District Heating Corporation Act. 




Pipeline workers prepare pipe sections for joining. 




Providing customer information on services, conservation, safety, and energy issues is an important part of utility service. 



THE PUBLIC HEARING PROCESS 



Public hearings are the principal vehicle through 
which the Board functions. By providing a forum 
for the participation of all interested parties, a 
hearing ensures that the Board will render 
informed decisions which give consideration to a 
wide variety of views and interests. 

The process has several steps: 

1. Initiation 

The process begins: 

a) upon the receipt of an application; 

b) upon receipt of a reference from the 
Lieutenant Governor in Council or from the 
Minister of Energy or of Natural Resources; 

c) upon direction from the Board that it will 
initiate proceedings to consider a matter 
under its jurisdiction. 

2. Notice of Application 

The Board directs the applicant to serve notice 
of the application on all affected parties and 
interested public groups. 

For a major rate case, a natural gas utility will 

(1) publish announcements of its application 
in regional daily newspapers; 

(2) personally serve notice on municipal clerks 
in the utility's service area; and 

(3) notify others as directed by the Board. 

3. Interventions 

Interested parties may ensure their eligibility 
to participate in the hearing by filing an 
intervention with an explanation of the 
reasons for intervening. 

4. Notice of Hearing 

The Board determines the scope and probable 
length of the hearing and directs the applicant 
to serve notice of the time and place of the 
hearing on all parties who have intervened. 

5. Pre-Hearing Documentation 

a) Applications to construct pipelines are 
reviewed by the Ontario Pipeline 
Coordination Committee (OPCC) which 
examines them from an environmental 



6. 



aspect. This Committee sets out steps 
which a utility must take before its 
application will be heard by the Board. 
Route selection and environmental impact 
studies are among the things that will 
normally be required in pre-filed evidence. 

b) Evidence in support of an application is 
filed with the Board up to two or three 
months before the hearing. 

c) Board staff and intervening parties may 
seek additional information by way of 
written interrogatories. 

d) Utilities answer interrogatories concerning 
pre-filed evidence before the hearing 
commences. 

"First Day" Proceedings 

Before the hearing of evidence commences, 
the Board panel may review with interested 
parties procedural matters, technical issues, 
and the general approach to the hearing. This 
step gives everyone the opportunity to become 
familiar with the application and to identify all 
the issues they wish to address in the hearing. 




7. The Hearing 

. The Board ensures that sufficient evidence to 
make an informed decision is presented, 
tested and put on the record. The applicant 
usually testifies first through written evidence 
and witnesses. Intervenors and Special 
Counsel to Board staff then question these 
witnesses and may offer witnesses of their 
own. These witnesses may be cross-examined 
by the applicant. 

When all the evidence has been given, each 
party has the opportunity to offer a 
summation in the form of written or oral 
argument. 

The pre-filed evidence, transcripts of the 
hearing, and arguments are a matter of public 
record and are available at the Board office in 
Toronto. 

8. Board Decision 

The Board summarizes its findings in a 
"Report" or a document called "Reasons for 
Decision" either of which discusses all the 
issues and arguments raised in the hearing 
and indicates the Board's findings. Depending 
on the complexity of the case, this publication 
will appear a few weeks or months after a 
hearing. Copies of these documents are 
available from the Ontario Government 
Bookstore, 880 Bay Street, Toronto, upon 
payment of prescribed fees. Parties to the 
hearing receive copies automatically. 



9. Board Order or Recommendation 

A Board Order is a legal document directing 
the implementation of a Board decision. It is 
binding on the parties named. Board 
Recommendations are included in Board 
Reports to the appropriate Minister or 
Lieutenant Governor in Council who may or 
may not implement them. 

10. Review and Appeal 

A Decision or Order of the Board may be 
appealed by 

a) applying to the Board requesting that it 
rescind or amend its order; 

b) petitioning the Lieutenant Governor in 
Council requesting that a Board Order or 
Decision be confirmed, varied, rescinded 
or reheard; 

c) appealing an Order to the Divisional 
Court, provided that the appeal is based 
upon a question of law or jurisdiction. 





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ORGANIZATION 



Location 

The Ontario Energy Board is located in 
downtown Toronto on two floors of the Toronto 
Hydro building at 14 Carlton Street. Reception is 
located on the 9th floor. Hearing rooms and a 
Reference Library are on the 8th floor. 

Library 

The Reference Library is open to the public. It 
carries periodicals and other current information 
on regulation and the natural gas industry. 
Previous Board cases are available on microfilm at 
this library, and anyone wishing to research 
previous decisions may have access. 

Public Inquiries 

General inquiries concerning procedural matters 
on applications before the Board are handled by 
the Board Secretary. Interveners may also seek 
advice from members of the Technical staff when 
preparing to participate in the hearing process. 

Copies of Board Decisions and Reports may be 
purchased by the public from the Ontario 
Government Bookstore, 880 Bay Street, Toronto. 

Board Members and Staff 

The Chairman and Board members are appointed 
by the Lieutenant Governor in Council. The 
present Chairman was appointed in 1984 for a 
five year term. Board members are appointed for 
one to three year terms. Members have diverse 
backgrounds in law, engineering, economics, 
accounting and finance, and direct energy 
industry experience. 



There were 29 full time staff in fiscal 1985/1986, 
including Technical and Administrative Support 
staff with special or technical knowledge in 
matters related to Board hearings. Legal counsel 
and outside consultants may be engaged to 
conduct proceedings, advise, or testify. 

Ontario Pipeline Coordination 
Committee (OPCC) 

Chaired by a Board staff person, this Committee 
is concerned with the environmental impact of 
any pipeline construction. Ministries represented 
include: 

Agriculture and Food 

Citizenship and Culture 

Consumer and Commercial Relations 

Energy 

Environment 

Municipal Affairs and Housing 

Natural Resources 

Transportation and Communications 

The range of membership attests to the fact that 
environmental concerns are very broad. The 
OPCC prescribes steps, such as tabling studies on 
route selection and environmental impact, which 
a utility must take before a pipeline construction 
application will be heard by the Board. 
Committee members and consultants review such 
pre-filed evidence before it is tabled in hearings. 
The Committee also handles inquiries from 
affected groups who have particular concerns 
about a construction project. 





9 



OVERVIEW 



] Changes in Canadian energy policy created new 
challenges for the Ontario Energy Board and for 
the utilities under its regulation during fiscal 
1985/1986. The Western Accord of March 1985 
profoundly altered oil pricing and export policies, 
thereby changing the balance among competing 
energy sources. Falling world oil prices exerted 
downward pressure on the prices of competing 
fuels. Oversupply conditions for practically all 
energy sources exacerbated the price situation. 
Moreover, in reaching the Western Accord, the 
governments concerned also agreed that natural 
gas markets should be made more competitive. 
On October 31, 1985, the Governments of 
Canada, Alberta, British Columbia and 
Saskatchewan announced the Agreement on 
Natural Gas Markets and Prices which was 
intended to create conditions within the existing 
regulatory environment which would foster a 
market responsive pricing system in the natural 
gas industry. 

Among other things, the Agreement would allow 
end-use customers to purchase gas directly from 
producers (direct sales), and would allow 
producers selling gas through TransCanada 
Pipelines to offer discounts including Competitive 
Marketing Programs (CMPs) which would be 
passed through TransCanada and the local utility 
to the end-user. Availability of direct sales would 
be dependent upon the availability of contract 
carriage arrangements — agreements whereby the 
local utilities carry the gas purchased under direct 
sale to the customer for a fee. Ontario announced 
that it favoured such contract carriage in the 
province during the interim year (November 1, 
1985 to October 31, 1986), noting that the Ontario 
economy stood to benefit from lower gas supply 
prices which would help Ontario industries 
remain competitive. The government also noted 
that the Ontario Energy Board has the authority 
to review and approve interim contract carriage 
rates for a particular customer. 

The Board immediately began proceedings to 
determine interim contract carriage rates to be 
used by Ontario utilities in testing the new 
arrangements. It quickly became evident that 
there were many complex issues to be resolved in 
determining fair rates. It is a straightforward step 
to subtract the cost of the gas from existing rates, 
but the remaining figure still has many 



components. The cost of the pipelines 
themselves, maintenance, load balancing, and 
storage are just a few of the costs still left. And 
what if a customer does not want all of the 
services implied by this cost? How does this 
composite rate get "unbundled" for those who 
desire only some of the services, without 
affecting the interests of all other customers and 
the utility itself? The Board responded to the need 
to establish rates for immediate use while still 
providing for further refinement of the system by 
introducing "interim" rates in December 1985. 
Under the terms of the Board's orders, the 
utilities and the customers must reimburse each 
other for any difference between these interim 
rates and the final rates fixed at a later date. The 
government also asked the Board to begin 
"intensive studies to determine whether contract 
carriage rates can be continued (beyond the one 
year phase-in period) without adverse impacts on 
other gas customers or on the integrity of the gas 
distribution system." 

The Agreement on Natural Gas Markets and 
Prices raises several new issues with respect to 
"the public interest". More competitive pricing 
would appear to be in everyone's interest, but 
even that simple assumption may not hold for all 
people in all situations. One has only to consider 
the results of airline deregulation to realize that 
although the average cost of air travel has 
dropped substantially in the U.S., many routes in 
less populated areas have been eliminated 
causing much inconvenience for travellers in 
those areas. At present the method of regulating 
gas utilities may provide a rationale for utilities to 
expand service into areas that would not 
ordinarily produce an adequate return on 
investment. Since utilities are given the 
opportunity to earn the allowed return on their 
total investment and rates for similar services are 
uniform across the system, the customers buying 
the more profitable services may in effect 
subsidize those buying the less profitable 
services. Thus it may be that "deregulation" could 
mean lower prices in Toronto but decreased 
access to service in outlying areas. Traditionally, 
protection of the public interest has involved the 
Board in striking a balance between the lowest 
cost of service to the public and the cost that is 
commensurate with an acceptable access to the 
system and quality of service. These issues 



10 



require careful study. The choice between 
complete deregulation or retention of a form of 
regulation that allows some control over the 
distribution system is one that properly lies with 
the Ontario government as it interprets the public 
interest. In the meantime, the Board will continue 
to exercise its responsibilities in accordance with 
its powers under the Ontario Energy Board Act. 

There is no set definition of the concept of the 
public interest. If one could always attain a Pareto 
optimum— that is, could always make someone 
better off while making no one else worse 
off— regulation would be an easy task. 
Unfortunately, real life seldom offers this happy 
choice. In a report in 1970, the Board discussed 
this issue in the following terms: 

One of the problems in assessing the public 
interest is that a benefit to one group is often a 
detriment to another. Thus some cost 
reductions, which benefit the operating 
company and, under rate regulation, 
ultimately benefit the customers or share 
holders or both, might be at the expense of 
another sector of the public, for example, the 
employees. Cost reductions brought about by 
a reduction of the level of service might 
benefit shareholders at the expense of 
customers. Changes in income tax accounting 
to bring about benefits to present customers 
or shareholders might be at the expense of 
future customers or shareholders, or both. 

Under these circumstances it is obvious that 
the assessment of the public interest is not 
simply a matter of whether there is a specific 
benefit or a specific detriment. Rather, the 
Board, in arriving at its opinion, must weigh 
the various benefits against the various 
disadvantages and come to a conclusion as to 
whether there is an overall benefit or 
detriment to the public interest or conceivably 
whether, having regard to the advantages and 
disadvantages, there is no overall effect on the 
public interest. 

In 1985 the Board reported to the Lieutenant 
Governor on the same subject as follows: 

In the opinion of the Board, the public interest 
can only be more particularly defined by 



examining the facts and nature of the situation 
in which the test is to be used. The public 
interest will consistently take the form of the 
facts to which it is applied, moulding itself to 
the specific use to which it is being put. 

Having determined that the public interest is 
not generally definable, the Board would add 
that, in spite of its elusiveness, when it is 
applied to a specific set of facts, the 
reasonable man of the Common Law has no 
trouble determining if a particular act meets 
the test. A transmission tower, by this test, 
might be located in a productive, peaceful 
countryside, in spite of the residents' 
objections if the tower is found to be in the 
public interest of a nearby population centre. 
The public interest of the urban residents may 
be said to outweigh the local interests of the 
rural public in those circumstances. 

Lord Coke put it succinctly when he wrote: 

"The law prefers the public good to the 
private good and that if it has to choose 
between prejudice to the many and mischief 
particular to individuals, the individuals must 
suffer." 







11 



As the Board found in its 1985 report regarding 
the acquisition of Union Enterprises by Unicorp: 

6.8 In broad terms, the public interest will be 
satisfied by an undertaking or action that will 
result over time in an enhancement of the 
economic or general welfare of the public. The 
public interest can be satisfied without 
improving the economic or general welfare of 
every member of society; indeed, it is possible 
that the public interest in general can be 
satisfied even if some members of society are 
economically damaged. 

Essentially, one might interpret the public 
interest as the best possible accommodation 
of conflicting interests. 

6.9 In the regulatory context, the OEB follows a 
judgmental path in resolving conflicts of 
particular interests so as to arrive at a decision 
which the Board feels to be the best possible, 
in the public interest. There are no firm 
criteria for determining the public interest that 
will hold good in every situation and, 
generally speaking, it is probably preferable 
not to attempt to define these criteria too 
closely. The public interest is dynamic, 
varying from one situation to another and the 
criteria by which the public interest is judged 
may also change according to the 
circumstances. In considering the criteria, the 
Board must exercise judgment as to the 
specific values of conflicting interests. It must 
decide whether the public interest would be 
done any disservice in the event that the 
particular proposal was not approved. 

Certainly the range of topics that are of public 
concern has greatly expanded in recent years. For 
example, environmental issues are no longer of 
interest to only a select few. 

The Board has spent increasing amounts of time 
and research on environmental issues because it 
recognizes that such questions have significant 
implications for the quality of life in the province. 
Modern facilities and new service arrangements 
are necessary if Ontario is to grow and compete in 
Canadian and world markets, but the Board 
strives to ensure that changes occur with minimal 



disruptions to the ecosystems — be they economic, 
natural or social. The Ontario Pipeline 
Coordination Committee, under the direction of 
the Board, seeks to ensure that construction 
projects are given careful and full examination 
regarding environmental impact before 
permission to proceed with Board hearings is 
granted. As well, the Board itself hears testimony 
regarding environmental issues during its public 
hearings. 

The issue of contract carriage focused attention on 
the transmission and distribution of gas in the 
rate setting process. It must be remembered, 
however, that effective energy management also 
concerns itself with security of supply, safety, 
relationships among competing fuel sources, and 
conservation. When the Board sets rates, it 
endeavors to shape the attitudes of the utilities 
and their customers on these important concerns. 
Regulators seek to ensure security of supply and 
stability in prices, but they are ever-mindful of the 
need to provide flexibility in rate design and 
incentive programs so that utilities may attain 
their revenue requirement in a manner consistent 
with achieving overall energy management goals. 

The Board has recently undertaken a complete 
re-evaluation of the Ontario Energy Board Act. 
While the Board feels that the Act has provided an 
excellent framework for regulation in the public 
interest for many years, it wishes to ensure that 
efficiency and effectiveness can be maintained in 
the face of the dramatic changes in the industry. 
In the past, the Board has been able to meet its 
responsibilities without changes in legislation. 
This may still be possible, but there is a growing 
concern that the time is fast approaching when 
events may overtake us. As an essential element 
of the energy management that has contributed to 
the high standard of living in Ontario, the 
regulatory environment for the natural gas 
industry must keep pace with a changing world. 



12 



THE YEAR IN REVIEW 



The following sections contain lists of activities 
carried out by the Board between April 1, 1985, 
and March 31, 1986. The lists are grouped by 
type, and significant activities in each group are 
elaborated. Cases may have three stages: hearing, 
Report or Reasons for Decision, and, where 
appropriate, Board Orders. Our lists include 
cases for which any one or more stages occurred 
during the fiscal year. This approach was selected 



because many cases span more than one year, 
and a true picture of Board activity can be 
garnered only by recognizing this ongoing work. 
For example, the main rate hearing for Northern 
& Central Gas (EBRO 408) consumed 
considerable time and effort in fiscal 1985/1986 
although the decision was not issued until fiscal 
1986/1987. 



Pipeline Construction and Expropriations (EBLO) 

EBLO applications seek leave to construct pipelines or related facilities. Once leave is granted, the Board 
may also grant the utility authority to seek expropriations for land affected by the allowed construction if 
the utility and the landowners fail to reach voluntary agreement. 



FILE 
NUMBER 


APPLICANT 


MATTER 


HEARING 
DATE 


REASONS 
FOR DECISION 


ORDER 


EBLO 206 


Union 


Expropriation: DHLL 301, 304, 
304E, 313, 320, 320E 


Apr. 22/85 


- 


Apr. 26/85 


EBLO 208 


Northern & 
Central 


Leave: North Shore Project 


Dec. 18/84 


Mar. 13/85 


May 14/85 


EBLO 208 


Northern & 
Central 


Expropriation: 202, 210, 181, 147, 722, 
717, 711, 706, 692, 400, 392, 686, 572, 
453, 363, 360, 357, 751, 236, 356, 978 


May 21 /85 


— 


June 3/85 


EBLO 209 


Union 


Leave: Forest-Parkhill Line 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBLO 210 


Consumers' 


Leave: Manotick Line 


Apr. 16/85 


— 


May 14/85 


EBLO 211 


Consumers' 


Leave: Kemptville Line 


Apr. 16/85 


— 


May 14/85 


EBLO 214 


Northern & 
Central 


Leave: North Bay-Sudbury Loops 


Dec. 16/85 


- 


Jan. 20/86 
(part) 


EBLO 215 


Consumers' 


Leave: NPS36-Parkway Belt West 


Mar. 6/86 


— 


May 12/86 



EBLO 208: THE NORTH SHORE 
EXPROPRIATIONS 

As reported in last year's Annual Report, the 
Board issued its decision on January 21, 1985, 
allowing Northern and Central Gas Corporation 
Limited to construct a 170 kilometer pipeline from 
Sault Ste. Marie to Blind River and Elliot Lake. 

As Northern was unable to acquire easements 
from all the affected landowners, the company 
applied to the Board in May 1985, under Section 



49 of the Ontario Energy Board Act, for authority 
to expropriate land for pipeline right-of-way in 
order to be able to commence construction. 

On May 21, 1985, the Board convened a hearing 
in Sault Ste. Marie to hear the expropriation 
application. On May 23, 1985, the Board issued 
oral Reasons for Decision granting authority to 
expropriate. 



13 



Franchise Approvals (EBA) 

Under the Ontario Energy Board Act, the Board must approve the terms and conditions of agreements 
between gas utilities and municipalities. 



FILE 
NUMBER 


APPLICANT 


MATTER 


HEARING 
DATE 


REASONS 
FOR DECISION 


ORDER 


EBA 391 


Consumers' 


Franchise: Township of Rideau 


Apr. 16/85 


— 


May 17/85 


EBA 435 


Northern & 

Central, 

Consumers' 


Rehearing Township of Oro Franchise 


Mar. 21/86 


May 27/86 


June 25/86 


EBA 448 


Consumers' 


Franchise: City of Thorold 


Apr. 16/85 


— 


May 31/85 


EBA 449 


Northern & 
Central 


Franchise: Township of Macdonald, 
Meredith, Aberdeen Additional 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBA 450 


Northern & 
Central 


Franchise: Town of Elliott Lake 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBA 451 


Northern & 
Central 


Franchise: Town of Blind River 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBA 452 


Northern & 
Central 


Franchise: Village of Iron Bridge 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBA 454 


Union 


Franchise: Town of Forest 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 455 


Union 


Franchise: Town of Parkhill 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 456 


Union 


Franchise: Village of Arkona 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 457 


Union 


Franchise: Village of Ailsa Craig 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 458 


Union 


Franchise: Village of Thedford 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 459 


Union 


Franchise: Township of Bosanquet 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 460 


Union 


Franchise: Township of East Williams 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 461 


Union 


Franchise: Township of West Williams 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 462 


Consumers' 


Franchise: Township of South Gower 


Apr. 16/85 


— 


May 17/85 


EBA 463 


Consumers' 


Franchise: Township of 
Oxford-on-Rideau 


Apr. 16/85 


— 


May 17/85 


EBA 464 


Union 


Franchise: County of Lambton 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBA 465 


Northern & 
Central 


Franchise: Township of Val Rita 


Mar. 27/85 


— 


Apr. 15/85 


EBA 472 


Ontario Energy 
Board 


Rehearing of Lambton & Blenheim 


Nov. 25/85 


— 


June 30/86 



Pipeline Exemptions (PL) 

Under special circumstances, the Board may exempt a utility from undergoing a public hearing to obtain 
permission to construct a transmission or distribution line. Usually PLs are granted for repairs or minor 
relocations. 



FILE 
NUMBER 



APPLICANT 



MATTER 



ORDER 



PL 43 


Petrosar 


PL 44 


Union 


PL 45 


Consumers' 


PL 46 


Northern & Central 


PL 49 


Northern & Central 



Exemption: Lampton Construction Aug. 9/85 

Exemption: Thamesville Replacement July 26/85 

Exemption: NPS-12 West End of Ottawa Nov. 13/85 

Exemption: Portion of North Shore Project on Hwy #557 Oct. 16/85 

Exemption: Blind River Transmission Line Jan. 15/86 



14 



Certificates of Public Convenience or Necessity (EBC) 

The Board issues EBCs enabling a utility to proceed with construction necessary for the provision of service 
to a part or the whole of the franchise area. 



FILE 
NUMBER 


APPLICANT 


MATTER 


HEARING 
DATE 


REASONS 
FOR DECISION 


CERTIFICATE 


EBC 139 


Northern & 
Central, and 
Consumers' 


Rehearing: Township of Oro Franchise 


Mar. 21/86 


May 27/86 


June 25/86 


EBC 147 


Northern & 
Central 


Cert: Town of Elliot Lake 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 148 


Northern & 
Central 


Cert: Township of Macdonald, 
Meredith & Aberdeen Additional 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 149 


Northern & 
Central 


Cert: Township of Day & 
Bright Additional 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 150 


Northern & 
Central 


Cert: Township of Thessalon 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 152 


Northern & 
Central 


Cert: Town of Blind River 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 153 


Northern & 
Central 


Cert: Village of Iron Bridge 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 154 


Northern & 
Central 


Cert: Township of Johnson 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 155 


Northern & 
Central 


Cert: Township of Plummer 
Additional 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 156 


Northern & 
Central 


Cert: Township of Thompson 


Dec. 18/84 


Mar. 13/85 


May 31/85 


EBC 157 


Union 


Cert: Town of Forest 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 158 


Union 


Cert: Town of Parkhill 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 159 


Union 


Cert: Village of Arkona 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 160 


Union 


Cert: Village of Ailsa Craig 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 161 


Union 


Cert: Village of Thedford 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 162 


Union 


Cert: Township of Bosanquet 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 163 


Union 


Cert: Township of East Williams 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 164 


Union 


Cert: Township of West Williams 


Mar. 12/85 


May 17/85 


Aug. 12/85 


EBC 165 


Consumers' 


Cert: Township of Rideau 


Apr. 16/85 


— 


May 17/85 


EBC 166 


Consumers' 


Cert: Township of South Gower 


Apr. 16/85 


— 


May 17/85 


EBC 167 


Consumers' 


Cert: Township of 
Oxford-on-Rideau 


Apr. 16/85 


— 


May 17/85 


EBC 168 


Northern & 
Central 


Cert: Township of Val Rita 


Mar. 27/85 


— 


Apr. 15/85 



Uniform Accounting Orders (UA) 

Under the Ontario Energy Board Act, the Board has the authority to prescribe accounting procedures of gas 
utilities in the province. A utility wishing to adjust its accounting practices must receive Board approval. 



FILE 
NUMBER 



APPLICANT 



MATTER 



ORDER 



UA58 
UA59 



Consumers' 
Union 



Deferral of Gas Cost Charges 
Deferral of Gas Cost Charges 



Oct. 18/85 
Oct. 18/85 



15 



Reference from the Minister of Energy Regarding Ontario Hydro (HR) 

When Ontario Hydro wishes to change its bulk power rates, it must submit a proposal to the Minister of 
Energy. The Minister must then forward the proposal to the Board for review, through a public hearing, 
and Report. The Board's Report with recommendations is given to the Minister. 



Z HR 14: ONTARIO HYDRO RATE PROPOSAL 

Ontario Hydro's proposal to change its rates 
effective January 1, 1986, was referred to the 
Board by the Minister of Energy on April 11, 1985. 

Hydro originally proposed an average all 
customer rate increase of 3.6 percent. This 
increase was based on a revenue requirement for 
1986 of $4,521 million, an increase of $262 million 
over that for 1985. Of this increase, $105 million 
was forecast to be recovered through increased 
sales volumes, leaving $157 million to be 



recovered through the rate increase. The 
proposed revenue requirement included a net 
income provision of $400 million. 

In its Report to the Minister, the Board 
recommended an average rate increase of 4.9 
percent based on a 1986 revenue requirement of 
$4,597 million. This revenue requirement 
included a net income provision of $500 million. 
The Board indicated that this level of planned net 
income would contribute to improved financial 
soundness. "~\ 



Determination of Revenue Deficiency and Average All Customer Rate Increase 
for the Year Ending December 31, 1986 

($ millions) 



Revenues at Existing Price Levels 



Original 
Submission 



Updated 
Forecast 



Board 
Recommendation 



Primary Sales 

Revenue Requirement 

Revenue Deficiency 

Average All Customer Rate Increase 



4,364 


4,364 


4,384 


4,521 


4,522 


4,597 


(157) 


(158) 


(213) 


3.6% 


3.6% 


4.9S 



Pro-Forma Income Statement 
for the Year Ending December 31, 1986 

($ millions) 



Original 
Submission 



Updated 
Forecast 



Board 
Recommendation 



Gross Revenue Requirement 


4,922 


4,922 


5,002 


Deduct - Secondary Sales 


(401) 


(400) 


(405) 


Net Revenue Requirement 


4,521 


4,522 


4,597 


Operation, Maintenance and Administration 


1,003 


1,002 


970 


Fuel and Fuel-Related 


1,143 


1,115 


1,108 


Depreciation 


690 


689 


709 


Interest and Foreign Exchange 


1,686 


1,688 


1,715 


Net Income 


400 


428 


500 



16 



Other Energy Board Orders (EBO) 

This is a miscellaneous grouping of Board orders and decisions that do not fall within the defined 
categories. It is used for applications requesting orders for permission for such things as discontinuing 
service. It is also used for generic hearings— those called by the Board to give interested parties an 
opportunity to express their views on, and give the Board an opportunity to indicate its policies and 
guidelines regarding, general issues under its jurisdiction. 



FILE 
NUMBER 



APPLICANT 



MATTER 



HEARING REASONS 

DATE FOR DECISION ORDER 



EBO 111 


Clarke 




Joining of Interests - Enniskillen 


-26 


Mar. 5/85 


May 24/85 


Aug. 12/85 


EBO 114 


Ram 




Unitization: Cromar East Field 




Apr. 29/85 


Sept. 20/85 


Sept. 16/85 


EBO 116 


Ontario Energy 
Board 


Awarding of Costs 




Nov. 20/84 


June 12/85 


— 


EBO 122 


Union 




Contract Approval: Gaz Metro 




— 


— 


June 5/85 


EBO 123 


Union 




Designation of Lands East 
of Bickford Place 




Feb. 18/86 


June 18/86 


— 


EBO 124 


Union 




Contract Approval: Northern 
& Central 




— 


— 


Sept. 23/85 


EBO 125 


Ontario E 
Board 


nergy 


Review of Franchises & Certificates 


Nov. 13/85 


May 21/86 


— 


EBO 127 


Haldimar 
&Gas 


id Oil 


Leave to Discontinue Service 




Nov. 7/85 


Dec. 9/85 


Dec. 2/85 



EBO 116: GENERIC HEARING: COST 
AWARDS TO HEARING PARTICIPANTS 

The Board's Report on the Awarding of Costs and 
Related Procedural Matters was issued on June 
12, 1985. The procedure that was set out in the 
Report has been put into practice during this 
fiscal year. 

The eligibility for a cost award and the proportion 
of the costs to be awarded are decided by the 
panel hearing an application. The party awarded 
costs then submits a statement of costs to the 
Board. The Board Solicitor has been authorized to 
act as the Assessment Officer; the Assessment 
Officer will make a recommendation to the Board 
panel on the quantum of costs, i.e., whether the 
expenditures claimed are reasonable in the 
circumstances and have been incurred directly 
and necessarily for the purpose of the 
proceeding. The parties may make an objection to 
this recommendation. A cost award will be issued 
fixing the quantum to be awarded by the Board 
after it considers the recommendation and any 
objections. 



The Board did not deal with interim costs in the 
Report, instead it stated a case to the Divisional 
Court to clarify the Board's jurisdiction with 
respect to interim cost awards. The Court advised 
that the Board did not have the jurisdiction to 
provide intervenor funding in advance of a 
hearing "under the guise of exercising its 'costs' 
jurisdiction" and that legislative change was 
required. A motion for leave to appeal that 
decision was made in September to the Ontario 
Court of Appeal; leave to appeal was denied. 

In this fiscal year, cost awards were awarded in 
EBRO 403, EBRO 405-1 and HR 14. 



17 



EBO 125: GENERIC HEARING: NATURAL 
GAS FRANCHISE AGREEMENTS 

The hearing was called by the Ontario Energy 
Board to allow a complete review of municipal 
franchise agreements by all parties involved — the 
municipalities, the gas distributors, the gas 
consumers (particularly the large-volume 
customers) and the Board itself. 

Municipal franchise agreements generally contain 
two elements — the rights granted to the gas utility 
by the municipality to supply gas to the 
inhabitants and to use the municipal roadways to 
install a pipeline system, and the duties of the gas 
utility to comply with municipal requirements in 
return for the right to occupy the roadway. A 
major area of discussion was the sharing of costs 
of pipeline relocations caused by municipal 
construction in the municipal right-of-way. 



A related issue was the control over the use of 
such right-of-way once a franchise had been 
awarded granting to a utility the right to occupy 
such space. 

The OEB report proposed the establishment of a 
multi-party working committee (the Municipal 
Franchise Agreement Committee) made up of 
representatives of the municipalities of the three 
major franchise areas, the three major utilities 
(Consumers' Gas, Northern & Central Gas, and 
Union Gas), and the Board staff. A major task of 
this committee is to draft a model agreement to 
which parties and the OEB can refer as new 
agreements and renewals come before the Board 
for approval. The Committee also will consider a 
new model formula to allocate the costs incurred 
in pipeline relocation. 



Reports to the Minister (EBRM) 

The Minister of Natural Resources or the Minister of Energy may refer energy-related matters to the 
Board. The Board then holds hearings and issues its report to the appropriate minister. A common type 
of EBRM arises from a request for a permit to inject, store or remove natural gas from designated storage 
areas. Such requests are made to the Minister of Natural Resources under the Petroleum Resources Act. 
The Minister then refers the applications to the Ontario Energy Board for review and approval. 



FILE 








HEARING 




NUMBER 


APPLICANT 




MATTER 


DATE 


REPORT 


EBRM 70 


Dow 




Permit to Drill 


Mar. 26/86 


June 13/86 


EBRM 74 


Dow 




Permit to Flood 


Mar. 26/86 


June 25/86 


EBRM 77 


Union 




Permit to Drill Payne 20, Moore 22 


— 


May 24/85 


EBRM 78 


Union 




Permit to Drill Dawn 258, Dawn 19-1 


— 


May 24/85 


EBRM 80 


Proto Resources 


Ltd. 


Permit to Inject 


Nov. 14/85 


Nov. 25/85 


EBRM 81 


R.G. Bryant 




Permit to Drill 


Feb. 14/86 


Feb. 17/86 



18 



References from the Lieutenant Governor in Council (EBRLG) 

The Lieutenant Governor in Council may instruct the Board to carry out enquiries into energy-related 
matters. The Board then holds a hearing and makes a report with recommendations to the Lieutenant 
Governor. 



FILE 
NUMBER 



APPLICANT 



MATTER 



HEARING 
DATE 



REPORT 



EBRLG 28 
EBRLG 29 



Lieutenant Governor 
in Council 

Lieutenant Governor 
in Council 



Reference Re: Unicorp/Union 
Reference Re: LNG 



Apr. 9/85 
Mar. 25/86 



Aug. 2/85 



EBRLG 28: UNION/UNICORP 

On February 15, 1985, the Lieutenant Governor in 
Council issued an Order requiring the Ontario 
Energy Board to hold a public hearing with 
respect to the takeover of Union Enterprises Ltd. 
by Unicorp Canada Corporation. The Board was 
asked to examine and report on the probable and 
potential impact of the acquisition on Union, its 
present and future customers, and energy supply 
in Ontario. As well, the Board was asked to 
examine the need for, or desirability of, the public 
review and regulation of both the direct and 
indirect ownership and control and transfers 
thereof, of gas distributors and transmitters in 
Ontario. 

The hearing was held between April 9 and May 
19, 1985. The Board issued its report to the 
Lieutenant Governor in Council on August 2, 
1985. 

During the hearing, details of significant financial 
transactions which enabled Unicorp to be 
successful in its takeover bid were made public for 
the first time. As well, significant evidence was 
presented that caused the Board to examine not 
only its role during the transfer of ownership or 
control of a natural gas utility, but also its 
regulatory powers in general and its on-going 
responsibilities and authority. 

In its Report the Board re-affirmed the importance 
of the Government retaining its power of approval 
over the control or ownership of the three major 
natural gas utilities. As a result, the Board 
recommended that Section 26 of the Ontario 
Energy Board Act should be amended to provide 
for the following: 

No accumulation/acquisition of the voting shares 



of the utility, the parent or the grandparent of the 
utility, greater than 20% should take effect 
without the approval of the Lieutenant Governor; 

The proposed new owner must advise the 
Lieutenant Governor, the Minister of Energy and 
the OEB, of its intent to acquire such ownership 
or control of an Ontario gas utility; 

At the direction of the Lieutenant Governor, the 
OEB would hold a public hearing into the matter 
and make recommendations relating to any 
conditions of approval; 

The conditions of approval would be treated as an 
order of the Board and be monitored and 
enforced by it as such; 

The Lieutenant Governor would have the power 
under Section 35 to waive such a public hearing. 
The Board stated its view, however, that public 
hearings are desirable in these circumstances. In 
the absence of a public hearing, the Board 
submitted that it should be asked to recommend 
any appropriate conditions of approval since it 
will have the duty to monitor and enforce the 
conditions; 

Any transfer without the approval of the 
Lieutenant Governor would be void. 

With respect to the Union/Unicorp takeover 
specifically, the Board recommended certain 
changes to the undertakings that Union and 
Unicorp had indicated they would jointly give to 
the Lieutenant Governor in Council. Subject to 
these and the other recommendations set forth in 
its Report, the Board recommended to the 
Lieutenant Governor in Council that no action be 
taken to interfere with the takeover of Union 
Enterprises by Unicorp Canada Corporation. 



19 



EBRLG 29: REFERENCE TO REVIEW 
PROPOSED LIQUEFIED NATURAL GAS 
(LNG) STORAGE FACILITY 

In April 1985, Consumers' Gas announced its 
plan to construct an LNG storage facility to 
accommodate peak gas demands. The Ontario 
Pipeline Coordination Committee reviewed site 
selection data in September 1985. 

On October 15, 1985, Consumers' filed two 
applications with the Ontario Energy Board for: 

1. leave to construct two natural gas transmission 
pipelines; and 

2. a certificate of public convenience and 
necessity to construct works and supply gas in 
the Township of Haldimand. 

The applications proposed that a Liquefied 
Natural Gas (LNG) storage facility and the 
transmission pipelines to transport gas to and 
from the plant be constructed in Haldimand 
Township. The facility was proposed as a 
"peakshaving" plant to meet peak temperature 
sensitive load in 1994. 

Consumers' proposed to build the plant on a 180 
hectare site. The capacity of the proposed storage 
tank would be 92,000m 1 (liquid); the process 
facilities would be capable of supplying 8500 
10'm 1 (gas) for the seven peak days anticipated in 
1994. The liquid would be stored at -162°C at 
approximately atmospheric pressure. The 
anticipated cost of the project was proposed to be 
over $100 million. 

After requests by concerned citizens to designate 
the project under the Environmental Assessment 



Act, the Minister of the Environment referred the 
proposal to the Environmental Assessment 
Advisory Committee. The committee solicited 
opinions from interested parties and 
subsequently recommended that the proposal be 
designated under that Act. However, the 
Lieutenant Governor in Council by an Order in 
Council ordered the Ontario Energy Board to 
examine and, after holding a public hearing, to 
report on Consumers' proposal to construct the 
LNG storage facility. 

The Order in Council required the OEB to "take 
into account all such matters as to it appear to be 
relevant, and without limiting the generality of 
the foregoing, the Board is to have regard to the 
following: 

a. the need for the Project; 

b. the alternatives to the Project which will satisfy 
that need; 

c. the safety considerations associated with the 
Project; 

d. the advantages and disadvantages of the 
Project, the alternatives to the Project and the 
six candidate sites considered by the applicant, 
taking into account the physical, social, 
economic, cultural and natural environment, 
including effects on air, land and water; and 

e. the economic feasibility of the Project." 

The Board announced that the hearing would be 
held in Cobourg, Ontario. The hearing took place 
after the fiscal 1985/1986 yearend and will be 
reviewed in the next Annual Report. 




Members of public review Consumers' display 
at LNG hearings. 



20 



Natural Gas Rate Reviews and Interim Rate Reviews (EBRO) 

EBRO applications are made by the utilities to seek rate adjustments. The Board may also initiate such 
proceedings if a utility has not submitted an application and the Board considers that a review is 
required. 



FILE 
NUMBER 



APPLICANT 



MATTER 



HEARING 
DATE 



REASONS 
FOR DECISION 



ORDER 



EBRO 392-5 Wellandport 

EBRO 403 Consumers' 

EBRO 403-1 Consumers' 

EBRO 405-1 Union 

EBRO 405-2 Union 

EBRO 405-3 Union 



Interim Rates 
Rates 
Interim Rates 

Rates 

Rates 

Rehearing of Rate to Petrosar 



EBRO 406 


Tecumseh 


Rates 


EBRO 407 


NRG 


Rates 


EBRO 407-A 


NRG 




EBRO 407-1 


NRG 


Rates 


EBRO 407-2 


NRG 


Interim Rates 


EBRO 407-3 


NRG 


Interim Rates 


EBRO 407-5 


NRG 


Interim Rates - 
Revenue Deficiency 


EBRO 408 


Northern & 
Central 


Rates 


EBRO 408-1-1 


Northern & 
Central 


Interim - Removal of 
C.O.S.C.&T.A.P. 


EBRO 408-1-2 


Northern & 
Central 


Interim - Revenue Deficiency 


EBRO 409 


Kidd Creek 


Rates 


EBRO 410 


Consumers' 


T- Rates 


EBRO 410-1-1 


Cyanamid 


Interim - T-Rates 


EBRO 410-1-1 


Cyanamid 


Interim Interim Rates 
(amendments to 410) 


EBRO 410-2-1 


QNS Paper 


T-Rates (Consumers') 


EBRO 410-3-1 


Canadian 


Interim T-Rates (Consumers') 



Gypsum 

EBRO 411 Northern & 

Central 

EBRO 411-1-1 Nitrochem 

EBRO 412 Union 

EBR0412-1 C.I.L. 



T-Rates 

Interim T-Rates 

T-Rates 
Interim T-Rates 



June 3/85 
Nov. 20/85 

June 25/85 

Nov. 18/85 
Mar. 18/86 



May 13/85 
Dec. 2/85 



July 31/85 
Nov. 8/85 
Jan. 14/86 

Oct. 15/85 

Dec. 17/85 



Oct. 21/85 
Jan. 27/86 
Jan. 27/86 



Jan. 27/86 

Jan. 27/86 

Jan. 27/86 
Jan. 27/86 



Sept. 25/85 

Dec. 23/85 & 
Jan. 14/86 

Oct. 28/85 
Nov. 29/85 
addendum 

May 5/86 



June 14/85 
Feb. 28/86 
Apr. 18/86 



Jan. 22/86 
May 30/86 
Jan. 15/86 
Jan. 15/86 

Apr. 21/86 
Apr. 4/86 



Apr. 4/£ 



Apr. 4/86 



Jan. 3/86 
Oct. 11/85 
Dec. 6/85 

Dec. 24/85(1) 
June 6/86 

Apr. 7/86 
June 5/86 

July 21/86 
Portion of 
EBRO 405 

July 26/85 

Mar. 26/86 

Apr. 25/86 

Apr. 29/85 

Aug. 12/85 

Nov. 28/85 

Feb. 4/86 

July 21/86 

Feb. 4/86 

Feb. 4/86 
Portion of 
EBRO 408-1-1 

June 25/86 

Dec. 24/85 
Feb. 27/86 

Feb. 28/86 
Mar. 26/86 



Dec. 24/85 
411-1-1 



Dec. 24/85 
412-1-1 



21 



Natural Gas Rate Reviews and Interim Rate Reviews (EBRO) (continued) 



FILE 
NUMBER 



APPLICANT MATTER 



HEARING 
DATE 



REASONS 
FOR DECISION 



ORDER 



EBRO 412-2-1 

EBRO 412-3-1 
EBRO 413-1-1 
EBRO 413-2-1 
EBRO 415-1-1 

EBRO 415-2-1 

EBRO 415-3-1 

EBRO 415-4-1 

EBRO 415-5-1 

EBRO 415-6-1 

EBRO 415-7-1 

EBRO 415-8-1 

EBRO 415-9-1 

EBRO 417- 1-1 
EBRO 417-2-1 



Canadian 
Gypsum 

Polysar 

Union 

Union 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Northern & 
Central 

Consumers' 

Consumers' 



Interim T-Rates (Union) 

Interim T-Rates (Union) 
CMP Rate -C. I. L. 
CMP Rate - Allied Chemical 
CMP Rate - Algoma Steel 

CMP Rate - Great Lakes 
Forest Producers 

CMP Rate - Dupont Canada 

CMP Rate - Abitibi Price Inc. 

CMP Rate - Courtaulds Canada 

CMP Rates - Inco 

CMP Rates - Dupont Canada 

CMP Rates - Cornwall Chemical Ltd. 

CMP Rates - Spruce Falls 
Power & Paper Co. 

CMP Rates - Ford Glass Ltd. 

CMP Rates - Ford Motor 
Company of Canada 



Mar. 26/86 

Mar. 26/86 
Jan. 10/86 
Feb. 3/86 
Feb. 27/86 

Feb. 27/86 

Feb. 27/86 

Feb. 27/86 

Feb. 27/86 

Mar. 12/86 

Mar. 19/86 

Mar. 19/86 

Mar. 25/86 

Mar. 21/86 
Mar. 21/86 




Anticipating the possibility of the need for future changes to the pipeline system, a worker welds on the main-flange which 
will facilitate adaptibility of the line. 



22 



EBRO 403: THE CONSUMERS' GAS 
COMPANY LTD. (CONSUMERS') 

Consumers' is Canada's largest natural gas 
distribution utility serving over 800,000 
residential, commercial and industrial customers 
in south, central and eastern Ontario, western 
Quebec and northern New York state. Its annual 
sales of gas in Ontario are in excess of 8.5 10 M m- . 

By application dated March 7, 1985, Consumers' 
requested rate increases for all customers effective 
October 1, 1985, in order to recover a projected 
$23.9 million gross revenue deficiency for its 1986 
test year. The hearing which began on June 3, 
1985, lasted approximately three weeks. The 
Board issued its decision September 25, 1985. 

During the course of the hearing, a number of 
modifications were made by Consumers' to its 
submission, resulting in reductions to the claimed 
revenue deficiency. The table shows the key 
financial elements of Consumers' final 
submission and the Board's decision. Data from 
the previous Board decision, which was for 
Consumers' 1984 test year, is shown for 
comparison. 



EBRO 395 EBRO 403 EBRO 403 

Previous Final Board 

Board Consumers' Decision 

Decision Submission Sept. 25/85 

TEST YEAR ENDING SEPT. 30 





1984 


1986 


1986 


Rate Base ($000's) 


1,211,700.0 


1,299,800.0 


1,284,200.0 


Utility Income 








($000's) 


155,100.0 


159,500.0 


159,700.0 


Indicated Rate of 








Return on Rate Base 


12.80% 


12.27% 


12.44% 


Cost of Capital 








Long-term Debt 


12.11% 


12.00% 


11.98% 


Unfunded Debt 


10.00% 


10.50% 


10.00% 


Preference Shares 


10.98% 


11.27% 


11.27% 


Common Equity 


15.30% 


15.50% 


15.00% 


Allowed/Requested 








Return on Rate Base 


12.80% 


12.98% 


12.59% 


Gross Revenue Deficiency 








($000's) 


- 


19,500.0 


4,200.0 



The changes in rate base made by the Board 
largely reflect its direction to Consumers' to 
remove certain of its non-utility activities such as 
merchandising programs (appliance centres) from 
rate base and hence from rate regulation. 

As part of its submission, Consumers' proposed 
new rates which were to reflect three seasons 
rather than the existing two seasons. The Board 
rejected this proposal at that time. 

The gross revenue deficiency of $4.2 million 
found by the Board was not reflected in rates, but 
rather was placed in a deferral account. On 
November 4, 1985, Consumers' applied to 
re-open EBRO 403 to reflect in rates the deferred 
$4.2 million deficiency and the balances in other 
deferral accounts including the one that had been 
accumulating various cost of gas changes. The net 
result of closing out all these deferral accounts 
was a rate decrease for all customers. 



EBRO 405: UNION GAS LIMITED (UNION) 

Union is the second largest gas distributor in 
Ontario, serving approximately 518,000 
customers in Southwestern Ontario. Union also 
operates a network of pipeline, storage and 
compression facilities to provide service to its 
customers and other utilities in Eastern Ontario 
and Quebec. 

Union did not file an application to increase rates 
for its 1986 test year (12 months ending March 31, 
1986). However, in light of Union's actual and 
forecast overearnings for fiscal 1984 and fiscal 
1985, the Board convened a hearing to enquire 
into, hear and determine certain matters with 
respect to Union's 1986 fiscal year. 

On January 23, 1985, Union applied for a rate 
increase for its 1987 fiscal year. Union also applied 
at that time for an order to recover in rates the 
balances in and accruing under SNG Premium 
Accounts No. 3 and No. 4, together with interest 
costs thereon. In applying for these rate 
increases, Union also sought an appropriate rate 
classification and rate for the sale of gas to 
Petrosar Limited. 



23 



The Board's review of certain matters with respect 
to Union's 1986 fiscal year was heard together 
with Union's application for recovery of SNG 
Accounts No. 3 and No. 4 and its request for an 
appropriate rate classification and rate for the sale 
of natural gas to Petrosar. The hearing was held 
under Board File EBRO 405-1 in July and August 
of 1985. The Board issued its Reasons for Decision 
on October 28, 1985. 

The hearing into Union's application for a rate 
increase for fiscal 1987 was held under Board File 
EBRO 405-2 during November and December 
1985 and January 1986. The Board issued a 
decision on April 3, 1986, with reasons following 
on May 5, 1986. The content of that decision will 
be discussed in next year's Annual Report of the 
Board. 

The Board's EBRO 405-1 Decision found the rate 
applicable to sales of natural gas by Union to 
Petrosar, pending the outcome of the litigation 
between these two parties, should be negotiated 
within the present M7 range. Following an appeal 
of this Decision to Cabinet by Union, the Board, 
on its own motion, reviewed and confirmed its 
Decision under file EBRO 405-3. 

The capital budget forecast for fiscal 1986 was 
lowered by $6.6 million; the allowance for cash 
working capital was reduced by $397,000; the 
forecast of 1986 M7 sales volume was adjusted 
upwards by 188,035 10 3 m 3 ; and the forecast of 
operations and maintenance expense was 
reduced by $2,345,000. The rate of return on 
common equity from the EBRO 397 Decision was 
accepted without contest. As a result of these 
adjustments, the Board found a revenue surplus 
for 1986 of $3,079 million. 

The Board authorized the recovery in rates of 
SNG Premium Account No. 3, but found its size 
to be excessive because Union had failed in the 
proper management of the account. As a result, 
the Board disallowed all interest accumulated in 
Account No. 3 from its inception, which the 
Board estimated to be $2.6 million. The Board 
ordered Union to amortize $3.4 million of the 
account in fiscal 1986. This had the result of 
reducing the found revenue surplus to a revenue 
deficiency of $321,000, which sum was deemed 
not significant enough to warrant a change in 
rates for fiscal 1986. 



The Board did not authorize Union to collect in 
rates any of the amounts which had accumulated 
in Premium Account No. 4. 

The table shows the key financial figures in 
Union's final submission and the Board's 
subsequent decision. The Board's decision for the 
1985 test year is shown for comparison. 



EBRO 397 EBRO 405-1 EBRO 405-1 

Previous Final New Board 

Decision Union Decision 

Apr. 24/84 Submission Oct. 28/85 

TEST YEAR ENDING MARCH 31 





1985 


1986 


1986 


Rate Base ($000 's) 


830,281 


884,089 


880,392 


Utility Income 








($000's) 


105,503 


112,593 


114,817 


Indicated Rate of 








Return on Rate Base 


12.71% 


12.74% 


13.04% 


Cost of Capital 








Long-term Debt 


12.01% 


12.47% 


12.47% 


Short-term Debt 


10.50% 


9.30% 


9.30% 


Preference Shares 


10.05% 


10.12% 


10.12% 


Common Equity 


15.60% 


15.60% 


15.60% 


Allowed Rate of Return 








on Rate Base 


12.75% 


12.75%(1) 


12.875% 


Revenue Deficiency 








($000's) 


731 


3,669(1) 


321 



Note: (1) The rate of return on rate base allowed in EBRO 397 was 
used in this calculation. 

During the course of the EBRO 405-2 
proceedings, Union applied for an interim rate 
decrease effective November 1, 1985, to reflect 
accumulated cost of gas reductions resulting from 
various changes in taxes, subsidies and gas 
prices. Union also proposed to refund to 
customers the cost of gas savings that had 
accrued up to and including October 31, 1985. In 
an interim order dated December 24, 1985, the 
Board approved Union's proposal. 



24 



EBRO 407: NATURAL RESOURCE GAS 
LIMITED (NRG) 

NRG is a relatively small gas distribution utility 
serving approximately 1800 customers in Aylmer 
and surrounding communities. NRG purchases 
its natural gas from Union and a number of local 
producers. 

The rate application was filed in March, 1985. 
Some months elapsed before the filing of 
supporting material for the main application, and 
the Board dealt with a number of interim rate 
applications including a $243,000 increase in 
revenues in November, 1985, and $157,000 in 
January, 1985. The question of the cost of liability 
insurance premiums prompted considerable 
discussion during the proceedings. The Board's 
final decision was issued on April 18, 1986. 

The table shows the key elements of NRG's 
submission as well as the Board's decision. 



EBRO 393 
Previous 

Board 
Decision 

Oct. 19/84 



EBRO 407 EBRO407-A 

Final New Board 
NRG Decision 

Submission Apr. 18/84 



TEST YEAR ENDING SEPTEMBER 30 





1984 


1986 


1986 


Rate Base ($000's) 


1,620 


2,540 


2,438 


Utility Income 








($000's) 


188 


131 


174 


Indicated Rate of 








Return on Rate Base 


11.6% 


5.16% 


7.12% 


Cost of Capital Debt 


13.77% 


12.50% 


12.75% 


Preference Shares 


9.00% 


9.00% 


9.00% 


Common Equity 


16.25% 


16.50% 


15.80% 


Allowed/Requested Rate 








of Return on Rate Base 


13.93% 


13.61% 


13.20% 


Revenue Deficiency 








($000's) 


77.7 


455 


314 




25 



EBRO 408: NORTHERN AND CENTRAL GAS 
LIMITED (NORTHERN) 

Northern (whose name was officially changed to 
ICG Utilities (Ontario) Ltd. effective May 5, 1986) 
serves approximately 150,000 customers in 
northwestern, northern and eastern Ontario. It 
distributes gas to more than 100 communities in 
an area extending from Kenora to points 200 miles 
along the shores of Lake Ontario and the St. 
Lawrence River. 

By application dated July 24, 1985, Northern 
requested rate increases for all customers effective 
January 1, 1986, in order to recover a projected 
deficiency for its 1986 test year of $14,038,900. The 
hearing was held in October and November 1985. 
The Board issued interim decisions on January 15, 
1986, and a final decision on May 30, 1986. 

The table shows the key financial elements of 
Northern's final submission and the Board's 
decision. The Board's decision for the 1985 test 
year is shown for comparison. 



EBRO 399 EBRO 408 EBRO 408 

Previous Final New Board 

Board Northern Decision 

Decision Submission May 30/86 

TEST YEAR ENDING 





1985 


1986 


1986 


Rate Base ($000's) 


308,137.3 


375,370.7 


375,370.7 


Utility Income 








($000's) 


37,953.9 


42,767.5 


44,091.4 


Indicated Rate of 








Return on Rate Base 


12.32% 


11.39% 


11.75% 


Cost of Capital 








Long-term Debt 


12.86% 


12.45% 


10.25% 


Short-term Debt 


N.A. 


N.A. 


12.43% 


Preference Shares 


6.28% 


6.56% 


6.59% 


Accumulated Tax 








Deferrals 


3.00% 


3.00% 


0.00% 


Common Equity 


15.75% 


16.00% 


15.00% 


Allowed/Requested 








Return on Rate Base 


13.23% 


13.14% 


12.74% 


Revenue Deficiency 








($000 's) 


5,722.5 


14,038.9 


7,957.5 



Northern proposed major structural design 
changes to all of its rate classes. This aspect of its 
application, however, was deferred until the next 
major rate case owing mainly to the uncertainty 
over the future impact of probable deregulation of 
Northern's gas supply costs. 

On December 11, 1985, Northern filed an 
application for interim rate reductions effective 
January 1, 1986, to account for accumulated 
changes in its gas purchase costs and taxes. 

As well, Northern proposed to refund, by means 
of a lump sum credit, the net cost savings that 
had accrued to December 31, 1985. In its decision 
(EBRO 408-1-1) dated January 15, 1986, the Board 
approved both the proposed refund and the rate 
decrease effective January 1, 1986. 

In a further application dated December 11, 1985, 
Northern requested an interim order for rate relief 
effective January 1, 1986, pending final 
disposition of the main case. 

The Board issued interim reasons for decision 
(EBRO 408-1-2) on January 15, 1986, allowing 
Northern to implement interim rate increases to 
recover additional revenues of $6,500,000 through 
a uniform rate increase to all its customers 
effective January 1, 1986. 

The effect of these two interim rate changes were 
netted so that customers only experienced one 
rate change (an increase for some and a decrease 
for others) effective January 1, 1986. The Board, in 
its final decision, then found an additional 
deficiency of $1,457,500 effective April 21, 1986. 
This additional deficiency was to be computed 
and recovered in the same manner as that used 
for the January 1, 1986, interim revenue deficiency 
and was to be effective on all gas consumed on or 
after April 21, 1986. 



EBRO 409: KIDD CREEK MINES LTD. 
(KIDD CREEK) 

Kidd Creek, located in Timmins, is a large volume 
industrial customer of Northern & Central Gas 
Corporation Limited (Northern). 



26 



On or about April 7, 1978, Northern and 
Texasgulf Canada Ltd. (Kidd Creek's predecessor) 
entered into a five-year contract to supply gas at 
Texasgulf's mine site under Northern's Rate 302 
(now 308). The contract was to continue thereafter 
unless terminated, in writing, by either party 
with six-months prior notice. Prior to the expiry 
of the initial five-year term, Kidd Creek requested 
Northern to serve it under negotiable Rate 320, 
effective November 1, 1983. Nothern refused, 
saying Kidd Creek failed to meet its feasibility 
criteria for service under Rate 320. 

Kidd Creek filed an application dated June 4, 
1985, requesting that the Board issue an Order, 
pursuant to Sections 15 and 19 of the Ontario 
Energy Board Act, fixing Rate 320 as the rate at 
which Northern must sell gas to Kidd Creek at its 
mine site. In addition Kidd Creek requested that 
the Board order a refund of all amounts overpaid 
since November 1, 1983. 

The Board heard the application commencing 
October 21, 1985, and issued its Reasons for 
Decision on April 21, 1986. In those reasons the 
Board found that the Rate 320 schedules had 
neither expressly nor implicitly ever included a 
feasibility test for access to the rate and, further, 
Northern had no right to impose conditions 
beyond those already contained in the 
applicability and eligibility clauses of the schedule 
without prior approval of the Board. As a 
consequence, the Board found that Kidd Creek 
had been improperly excluded from service 
under Rate 320 since November 1, 1983, and had, 
therefore, overpaid Northern since that date. 

Northern was ordered to instate Kidd Creek as a 
Rate 320 customer and refund all amounts 
overpaid. 



EBRO 410, 411, 412: CONTRACT CARRIAGE 
RATES 

To make the new market-oriented arrangements 
contained in the Agreement on Natural Gas 
Markets and Prices available to end-users in 
Ontario, the Board approved interim contract 
carriage arrangements on Ontario distribution 
systems. In December 1985, the Board called 
hearings on its own motion to consider interim 
contract carriage arrangements for Consumers', 



Union and Northern. At the same time the Board 
ordered that the three hearings be combined to 
consider elements common to the three 
distributors. 

The hearing commenced on January 27, 1986, and 
continued for thirteen days concluding on 
February 12, 1986. The Board issued its decision, 
dated April 4, 1986, in which it supported the 
availability of the new market-oriented gas 
purchase arrangements for the interim period. 
Rate schedules, including terms and conditions 
were determined for such arrangements, but the 
Board found that approval of each specific 
contract would be required. The Board also noted 
its intention to hold another hearing later in the 
year to hear and determine matters relating to 
permanent contract carriage arrangements in 
Ontario. 




27 



MINI-GLOSSARY 



Argument: 

The final step in a hearing, during which participants 
summarize their positions on various matters of concern 
based on the evidence adduced. 

Board Order: 

A legal document directing the implementation of a Board 
decision. An Order is binding on the indicated parties. 

Board Recommendation: 

Usually contained in a Board Report to a Minister or to the 
Lieutenant Governor in Council on Ontario Hydro or some 
other energy-related matter. Such recommendations are not 
binding. 

Bulk Power Rates: 

Wholesale electricity rates to municipalities and certain 
industrial customers of Ontario Hydro having an average 
annual power demand of 5,000 kilowatts or more. 

Buy/Sell Agreement: 

Arrangement whereby an end-user purchases gas from a 
producer and then sells it to the local distribution utility 
who comingles that gas with other supplies. The end-user 
then buys gas from the local utility in the usual manner. 
The difference between the price paid to the producer and 
the price received from the local utility minus any 
transportation costs accrues to the end-user. 



Direct Sales: 

Natural gas supply purchase arrangements transacted 
between producers and end-users at negotiated prices for 
which pipeline transportation arrangements must then be 
negotiated separately with TransCanada and the local 
distribution utility. 

Gigajoule: 

A measure of energy content in fuel; a typical residential 
consumer of natural gas might use about 130 gigajoule(GJ) 
per year for household heating. (One GJ = approximately 
.95 Mcf . of natural gas.) 

Interrogatories: 

Written requests for the supply of additional information or 
clarification of information already received. 

Intervention: 

Notice of intent to participate in hearings; stating the 
interest in the proceeding. The person or group is called an 
intervenor. 

Rate Base: 

The amount that a utility has invested in assets that are 
used and useful in providing service minus accumulated 
depreciation plus an allowance for working capital and any 
other items which the Board may determine. Rate base may 
also be net of accumulated deferred income taxes. 



CMP: 

Competitive Marketing Program: a discount program 
offered by producers selling system gas to meet competitive 
situations by allowing the end-user/distribution utility to 
negotiate a reduced price that is then passed from the 
producers through TransCanada and the local utility to the 
end-user. 

Commodity Charge: 

The variable component of pipeline transportation tolls or 
gas sales rates designed to recover variable costs of 
providing service. 

Contract Carriage: 

Transportation service provided for the transport of gas not 
owned by the transporting pipeline company. See also 
T-SERVICE. 



Rate of Return on Common Equity: 

Utility income, after tax, expressed as a percentage of the 
amount of common equity approved for inclusion in the 
utility's capital structure. 

Rate of Return on Rate Base: 

The amount which a utility is allowed to earn expressed as a 
percentage of the rate base. Note that this return is not 
guaranteed to the utility. Rather, this is the return that the 
company has a reasonable opportunity to earn given 
forecast conditions. 

Revenue Requirement: 

The allowed expenses of the utility and the allowed return 
on rate base are added together to obtain the total amount 
which the utility must recover through rates in order to 
cover its costs of providing service. 



Demand Charge: 

The fixed component of pipeline transportation tolls or gas 
sales rates designed to recover fixed costs of providing 
service. 

Designated Gas Storage Area: 

A land area containing geological formations into which the 
Board may authorize a person to inject, store, and remove 
gas. Injection of gas for storage into any geological formation 
outside of a designated gas storage area is prohibited under 
section 20 of the Ontario Energy Board Act. 



Test Year: 

A period of twelve consecutive months (usually the 
company's next full fiscal year) for which projections of 
costs, revenues, expenses and rate base are studied by the 
Board in order to set rates which will allow the utility the 
opportunity to earn a reasonable rate of return. 

T-Service: 

The gas transportation service offered by a pipeline 
company or distributor to transport gas owned by others. 
See also CONTRACT CARRIAGE. 



28 



Copies of this and other Board publications may be 
purchased from the Ontario Government Bookstore, 
880 Bay Street, Toronto; Telephone (416) 965-2054. 

Out-of-town customers please contact 
The Ministry of Government Services, 
Publications Services Section, 
5th Floor, 880 Bay Street, 
Toronto, Ontario M7A 1N8. 

Telephone: (416)965-6015 

Toll Free Long Distance: 1-800-268-7540 
Northwestern Ontario: 0-Zenith 67200 



Production: 
Rae Graphics Limited 

Photographs of Board and Offices: 
Martin Sundland Photography 

All Other Photographs: 
The Consumers' Gas Company Ltd. 



ISSN 0317-4891